Do you remember all the advertisements on the Internet that you keep looking away from that exhort you to take advantage of some free debt consolidation service? They keep telling you that you can slash your monthly payments by half, if you take advantage of their service - that's just a click away.
How are real are these promises? Are there any hidden charges there? How do they manage to give their services away? To people who are overwhelmed with unsecured debt, having to pay a debt consolidation service can be a bit too much.
The free debt consolidation services that they keep coming across are actually run by nonprofit organizations that try to extend beleaguered family is some kind of lifeline.
They first voluntarily get in touch with the creditors who hold title to the loans that a family such as this owes, and try to negotiate a lower rate of interest to begin with; sometimes, they'll even find a way of settling the debt at a lower principal amount.
Once they are able to work something out here, they will provide options in having all of the family's loans and debts consolidated into one lump sum.
If all goes as planned, families in debt can find themselves having to pay up to a third less than what they would otherwise have and can be free of their burdens in a few years.
Of course, not all the free debt consolidation in the world is going to help a family get out of debt if they continue along the path of racking up loans on their credit cards that they can ill afford.
Most of these nonprofits provide free financial planning services that can help people learn financial literacy skills as well.
There are some homeowners who choose to take advantage of home equity loans in order that they might settle their debts.
Now this could be a good idea; if one can live with the idea that one loses one's home in the process.
Just because free debt consolidation comes from a nonprofit, doesn't mean that every one of these is always trustworthy.
Always make sure that you don't fall for the idea that you are getting something for nothing.
Look closely at your contract could see if you are paying a high interest rate.
Some of these can go as high as 21%; in case you don't know, that's crazy high.
They can also build a commission for themselves into the whole deal - sometimes it is 10% of every monthly payment you make.
They also get a cut from the creditor who is happy to have at least something on his loan.
Debt consolidation services are also known to sometimes miss payments.
And this affects your credit score.
Not to take anything away from the concept of the free debt consolidation service.
But one does need to keep one's eyes open for anything that may be amiss.
How are real are these promises? Are there any hidden charges there? How do they manage to give their services away? To people who are overwhelmed with unsecured debt, having to pay a debt consolidation service can be a bit too much.
The free debt consolidation services that they keep coming across are actually run by nonprofit organizations that try to extend beleaguered family is some kind of lifeline.
They first voluntarily get in touch with the creditors who hold title to the loans that a family such as this owes, and try to negotiate a lower rate of interest to begin with; sometimes, they'll even find a way of settling the debt at a lower principal amount.
Once they are able to work something out here, they will provide options in having all of the family's loans and debts consolidated into one lump sum.
If all goes as planned, families in debt can find themselves having to pay up to a third less than what they would otherwise have and can be free of their burdens in a few years.
Of course, not all the free debt consolidation in the world is going to help a family get out of debt if they continue along the path of racking up loans on their credit cards that they can ill afford.
Most of these nonprofits provide free financial planning services that can help people learn financial literacy skills as well.
There are some homeowners who choose to take advantage of home equity loans in order that they might settle their debts.
Now this could be a good idea; if one can live with the idea that one loses one's home in the process.
Just because free debt consolidation comes from a nonprofit, doesn't mean that every one of these is always trustworthy.
Always make sure that you don't fall for the idea that you are getting something for nothing.
Look closely at your contract could see if you are paying a high interest rate.
Some of these can go as high as 21%; in case you don't know, that's crazy high.
They can also build a commission for themselves into the whole deal - sometimes it is 10% of every monthly payment you make.
They also get a cut from the creditor who is happy to have at least something on his loan.
Debt consolidation services are also known to sometimes miss payments.
And this affects your credit score.
Not to take anything away from the concept of the free debt consolidation service.
But one does need to keep one's eyes open for anything that may be amiss.
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